When helping businesses find ways to grow larger and more profitable, I
start by analyzing the company’s current stage. If they are in Stage 1, it’s
time to create a strategic plan. If they are in Stage 2, the owner runs the
organization and becomes an industry leader. In Stage 3, it’s time to start
delegating essential tasks to senior people, and in Stage 4, systems are
created that allow the owner to scale their workforce.
By Stage 5, many owners are a little bored. Some want to make major
changes. They might wish they had the next big idea to catapult the
company into the big leagues. And that presents a risk.
The complacency or boredom that sets in at Stage 5 can also drive the
founder to lose sight of the things that made the firm successful in the first
So resist the impulse to disrupt a reliable revenue stream or sacrifice
dependability. Instead, work on ways to build on past successes. This is the
time to create a franchise-type system.
That means that instead of focusing on the nuts and bolts, the founder will
spend time building an authentic brand that has incremental meaning and
value. Innovation at this stage is not about what you do; it’s about how
customers perceive you.
Get in Touch With Emotional and Psychological
Building a brand involves finding more powerful ways to meet your
customers’ emotional and psychological needs. It’s time for the business to
grow beyond making or doing.
Meeting needs beyond delivering goods and services is a way to create
emotional equity. Once you do that, you’ll be able to transition into a
franchise-type system that replicates an experience, again and again, no
matter who is leading the company, no matter who is selling the product,
and, for many companies, no matter where you do business.
What Does Franchise-Type Business Success Look
There is a long list of companies that added emotional equity to their
offerings and were able to expand as a result. The stronger the emotional
equity is, the further that equity can be stretched or applied to other
Whole Foods started in 1980 with just 19 employees at one location in
Austin, Texas. In 2017, Amazon purchased Whole Foods for $13.7 billion, a
purchase price that well exceeded the value of the stores and distribution.
Amazon openly admitted it was paying for the value of the brand. Whole
Foods developed a meaningful experience that they could recreate at
location after location until eventually, the experience became more
valuable than the sum of its parts. Their emotional equity turned out to be
What about stores that don’t have retail outlets? The same principles apply
to mail-order exercise equipment (Peloton), airlines (Southwest),
entertainment (Disney), packages (FedEx), and the list goes on.
Why Owners Love Stage 5
It’s not always easy to reach Stage 5, but once the organization is ready to
scale up in this way, something magical happens: the owner no longer needs
to steer the ship every minute.
With systems in place and brand-building efforts in progress, it’s now
possible for the owner to leave for a day (or a month) and return to find that
the business ran successfully without them. The firm no longer relies on the
passion and push of one person.
Stage 5 also offers the chance for better margins. Again, think about the
Whole Foods example. When it started, competitive pricing was a challenge.
The store needed to be priced low, or it would lose business. Fast-forward to
2017; Whole Foods was nicknamed “Whole Paycheck” because it was a pricy
place to shop. But that didn’t keep people away. Why? Because even in
price-sensitive industries, businesses with incremental value don’t have to
match the competition’s low prices.
Finally, Stage 5 is the time to grow exponentially. With solid systems in
place, a strong leadership staff, and well-defined incremental value, it’s
possible to expand distribution quickly, open new locations, or even bring in
other owners. How fast and how high is up to you.
Want to Learn More?
Want to find out more about The 7 Stages of Small Business Success ?
Take a look at my best-selling book, listen to my podcasts, or watch for me
as a featured speaker at your next big industry event. And if you want
personalized attention to help you solve your company’s unique challenges,
contact 7 Stage Advisors for assessments, coaching, and